On Wall Street on Friday, the S&P 500 rose 0.9 per cent a day after soaring 5.5 per cent for its best day in more than two years. The Dow Jones Industrial Average added 32 points to its surge of more than 1,200 from a day earlier, while the Nasdaq composite jumped 1.9 per cent.

Hopes for more growth from China helped not only stocks but also oil prices to rise, with US crude gaining 2.9 per cent to $US88.96 per barrel.

The main reason for this week’s euphoria in markets was a report on Thursday showing inflation in the United States slowed by more than expected last month. That raised hopes the worst of inflation may have passed and the Federal Reserve can be less aggressive about raising interest rates to get it under control, though analysts cautioned high inflation could be slow to fall and some called Wall Street’s big rally overdone.

What the Fed does with rates is crucial for Wall Street because hikes slow the economy and can cause a recession, all while dragging down on stock prices. They’ve been the main reason for markets’ struggles this year.

Perhaps just as important as how bad inflation is at the moment is how high US households see it being in future years. That’s because too-high expectations can trigger a vicious cycle where people accelerate purchases and make other moves that inflame inflation further.

“The consumer is laser-focused on inflation and they’re feeling it every day,” said Brian Price, head of investment management at Commonwealth Financial Network. “I wouldn’t expect that we see any upside with regard to consumer sentiment until inflation comes under control.”

The Fed has already lifted its key overnight interest rate to a range of 3.75 per cent to 4 per cent, up from basically zero in March. The likely scenario is still for it to hike further into next year, and then to hold rates at that high level for some time.

Traders are increasingly betting the federal funds rate could top out around a range of 4.75 per cent to 5 per cent by early next year, according to CME Group.

A week ago, they saw a higher ultimate rate as more likely, with a sizable chunk expecting something like 5.25 per cent to 5.50 per cent.

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In the crypto market, meanwhile, prices sank again amid the industry’s latest crisis of confidence. One of the bigger trading platforms, FTX, filed for bankruptcy protection after its users began scrambling to pull out their money on fears about its financial strength and after a bigger rival nixed a deal to buy the troubled company.

The exchange and its founder are under investigation by the Department of Justice and Securities and Exchange Commission, and rivals have said FTX’s failure could dent confidence in the broader industry.

Bitcoin fell below $US16,800, down 6 per cent from a day earlier, according to CoinDesk. It set its record of nearly $US69,000 almost exactly a year ago, and it was above $US21,000 a week ago.

With Jessica Yun and AP